Oystons lose high court battle over Blackpool FC

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Oystons lose high court battle over Blackpool FC

Oystons lose high court battle over Blackpool FC

Valeri Belokon has won his court battle against Owen Oyston and his son, Karl Oyston (Club Chairman of Blackpool FC), the owners of Blackpool Football Club (Properties) Ltd (formerly Segesta Ltd) who are the majority shareholders in Blackpool FC.

The High Court has ordered the Oystons to purchase Belokon’s entire interest in the club for the sum of £31.27m. The decision serves as an important reminder of the potential implications of excluding a minority shareholder from the affairs and operations of a company.


Over 95% of the shares in Blackpool FC were originally owned by the first defendant company, Segesta. Segesta was, in turn, 97% owned by Owen Oyston. In 2006, it was agreed that Belokon’s claimant company, VB Football Assets (VB), would be given a 20% stake in Blackpool FC. Blackpool FC played in the Premier League between 2010 and 2011 but within five years had a meteoric downfall to League Two following financial difficulties at the club which have been followed by various allegations by its fans and Belokon of mismanagement of the club.

From May 2011 onwards, following relegation of Blackpool FC from the Premier League, Belokon's relationship with the Oystons deteriorated significantly. Belokon, who resigned as a director of the club in August 2017, accused the Oystons of improperly extracting tens of millions of pounds from Blackpool FC’s funds after it enjoyed a “jackpot” when winning promotion to the Premier League in 2010. Amongst other things, although VB had its own directors appointed at Blackpool FC (including Belokon himself), Belokon argued that VB had been excluded from receiving material information about Blackpool FC, including information required for board meetings, and that decisions which should have been made by the board had been made outside board meetings.

In September 2015, VB brought a petition alleging unfair prejudice, under section 994 of the Companies Act 2006.

Key Issues

The following key issues were raised at the High Court:

1. Whether substantial payments had been made out of Blackpool FC which had been improper?

2. Whether VB had been excluded from the management of Blackpool FC?

Decisions of the High Court

In respect of the first issue, the court found that paying away significant amounts of money to no benefit of Blackpool FC detrimentally affected its value and was unfairly prejudicial. Because the payments had been disguised dividends to the Oystons, so that VB and the minor shareholders did not benefit, there had been clear discrimination between the interests of Segesta and the minority shareholders of the club. It was found that this discrimination, which benefited Segesta and disadvantaged the minority shareholders, clearly constituted unfairly prejudicial conduct within the meaning of section 994 of the Companies Act 2006.

In respect of the second issue, a payment of £4.2m from the Blackpool FC Bank to the Oystons in September 2010 had been declared a disguised dividend, and had not been approved by the minority shareholders, including Belokon’s company. It was clear that the payments considered by the court amounted to unfairly prejudicial conduct. The Oystons had, using the Premier League money, by wrongly classifying the transactions and using its majority control of the company, simultaneously enriched itself, prejudiced Blackpool FC and behaved in a discriminatory manner towards the minority shareholders of the club. In his ruling, Mr Justice Smith said the Oystons had “abused their majority powers to the detriment” of both Belokon and Blackpool FC.

What was the outcome?

The Oystons were ordered to purchase the entire interest of VB in Blackpool FC for the sum of £31.27m. The judge ruled that an initial £10m should be paid within 28 days and for all the Oystons assets to be frozen while they present to the court how they propose to pay the total, plus millions for legal costs.

The Oystons were refused permission to appeal but it is open to them to apply directly to the Court of Appeal in an attempt to take their case further. In any event, the figures that the Oystons will have to pay to keep hold of the football club are huge. The Oystons have said they will appeal against certain aspects of the court ruling but, on 10 November 2017, they put Blackpool FC up for sale after 31 years of ownership.

Impact of the Decision

In finding that payments were disguised dividends to the Oystons, the judgment largely confirms Blackpool FC’s fans and Belokon’s accusations that the club had been mismanaged which has led to its recent plight.

However, the case represents a stark reminder for companies of the potential pitfalls of failing to include minority shareholders within certain affairs and decisions of the business. Failures to abide by the articles of association or shareholders’ agreement of a company and non-compliance with the Companies Act 2006 constitute a breach of the basis on which a shareholder subscribes for shares in a company and may justify the bringing of an unfair prejudice petition. The court has a wide discretion to make any order it thinks fit to remedy such unfair prejudice that the petitioning shareholder is able to establish.

Given that the unfairly prejudicial conduct (not to mention the ensuing litigation) will in the vast majority of cases have led to a breakdown in the relationship between the parties, effective relief will normally entail the making of an order providing for a clean break between the parties. The most common order is for the shares of the petitioning shareholder to be bought by other shareholder of the company (as in the case above) or even by the company itself.

Case: VB Football Assets v Blackpool Football Club (Properties) Ltd (formerly Segesta Ltd) and others

If you would like further information on unfair prejudice conduct or about this case please contact Sean Halliwell on 0345 070 6000.